B.04/08: Business model framework: Private Sector Facility

The Board:

  1. Decided that the Private Sector Facility will operate efficiently and effectively under the guidance and authority of the Board as an integral component of the Fund, including in relation to the result areas and specific core performance indicators, where relevant;
  2. Decided that the Private Sector Facility will address barriers to private sector investment in adaptation and mitigation activities, such as market failures, insufficient capacity and lack of awareness, in order to mobilize private capital and expertise at scale in accordance with national plans and priorities. This will include facilitating and enhancing the participation of national, regional and international private sector actors in developing countries;
  3. Recalled that, in line with the Governing Instrument, the Private Sector Facility will promote the participation of private sector actors in developing countries, in particular local actors, including small and medium sized enterprises and local financial intermediaries. The Facility will also support activities to enable private sector involvement in small island developing States and least developed countries. Modalities will be developed for consideration by the Board;
  4. Acknowledged that private sector investment in general relies on readiness and enabling environments, the enhancement of which could be supported by the Fund at large;
  5. Emphasized the need for the Private Sector Facility to pay specific attention to Africa and to adaptation activities at the national, regional and international levels;
  6. Acknowledged the need to mobilize funds at scale from, inter alia, institutional investors, such as pension funds and sovereign wealth funds, and to design modalities to that end;
  7. Decided that the Private Sector Facility will seek efficient solutions that minimize market distortions and moral hazard in the use of the Fund’s resources by using, inter alia, competitive processes;
  8. Decided that the Private Sector Facility will initially focus on grants and concessional lending and will also draw on a broad range of other financial instruments and modalities to achieve its objectives;
  9. Decided to establish a Private Sector Advisory Group that will make recommendations to the Board on Fund‐wide engagement with the private sector and modalities to that end. The Private Sector Advisory Group will comprise two developing country Board members, two developed country Board members, up to four private sector representatives from developing countries and up to four private sector representatives from developed countries, up to two civil society representatives, subject to the criteria determined through the terms of reference. Requested the Interim Secretariat to submit draft terms of reference, bringing in the views of independent experts, and including the criteria for selection, term of office, and replacement of these members, for consideration by the Board at its September 2013 meeting, with a view to establishing the Private Sector Advisory Group at that meeting;
  10. Decided that an appropriate risk management framework will be developed, enabling the Fund to exert due diligence and manage its risks prudently. For this purpose, the Board decided to establish a Risk Management Committee, and requested the Interim Secretariat to submit draft terms of reference for consideration by the Board at its September 2013 meeting, drawing on independent expertise;
  11. Decided to establish an Investment Committee that will review investment proposals and instruments and recommend their approval in accordance with social and environmental safeguards and the Fund’s objectives and the risk management framework. Requested the Interim Secretariat to submit draft terms of reference, taking into account delegating the appropriate level of final approval authority to the Committee, for consideration by the Board at its September 2013 meeting, drawing on independent expertise;
  12. Decided that the Private Sector Facility, in accordance with non‐objection procedures and in order to ensure consistency with national climate strategies and plans and a country‐driven approach:
    1. Will commence its operations through accredited national, regional and international implementing entities and intermediaries; and
    2. May over time work directly with private sector adaptation and mitigation actors at the national, regional and international levels, subject to consideration by the Board of a phased approach.